MPs may summon RBS pay chief after Hester bonus

Royal Bank of Scotland's director in charge of setting executive pay could be
summoned to appear before MPs to explain the state-backed lender's decision
to award its chief executive a bonus worth nearly £1m.

The Treasury Select Committee (TSC) is considering calling Penny Hughes, the head of RBS's remuneration committee, to defend the bank's award to chief executive, Stephen Hester, of a £963,000 bonus.

Andrew Tyrie MP, the chairman of the TSC, and other members of the Committee are expected to meet soon to discuss whether to call Ms Hughes as political and public anger over Mr Hester's bonus continues to grow.

Ms Hughes is no stranger to controversial executive pay packages and as a member of the remuneration committee of Home Retail Group, the owner of Homebase, saw off a 2009 shareholder revolt over the implementation of a lucrative bonus scheme for managers.

In particular, the TSC is likely to quiz Ms Hughes on why Mr Hester's annual bonus did not include a clause that could have denied him the payment of his all-share bonus should the bank's share price fall over the period before it vests.

The Committee will also look at the role played by UK Financial Investments, the body charged with managing the taxpayers' stakes in the nationalised banks.

A senior source at UKFI said its job was to protect the value of the holdings in RBS and Lloyds Banking Group. "You simply can't do that if there is no talent left. That is something that gets forgotten and is well worth remembering," said the source.

Chancellor George Osborne said on Friday that it was for RBS to set its staff's bonuses and that he did not want the Government to become shadow directors of the 83pc taxpayer-owned lender.

A spokesman for the Prime Minister said: "There is a contract in place. Under that contract he is entitled to be considered for a bonus in good faith."

Leading shareholder groups also backed the payment of Mr Hester's bonus. Otto Thoresen, director-general of the Association of British Insurers, said it was "understandable" to award the RBS chief his bonus.

Mr Tyrie said the debate over Mr Hester's bonus demonstrated the need for the Government to be clear whether it still thought RBS should be run as a private company.

"We all need to decide if we want RBS to be run to maximise taxpayer returns and to get our money back, or if we want it to be run as a nationalised industry," said Mr Tyrie.

RBS is expected to announce within days the sale of its corporate broking business, Hoare Govett, to US investment bank Jefferies.